and don't miss an interview with the bravest girl in the world. that's tonight. fareed zakaria starts right now. >> this is "gps." welcome to all of you in the united states and around the world. i'm fareed zakaria. we'll start today's show asking a simple question. why has washington become so dysfunctional? what are the roots of the discord? i put together a terrific panel of experts who have studied american politics closely. then lloyd blankfein, the chairman and ceo of goldman sachs on the great signs of strength the united states economy was showing before washington went to war with itself. and on who's at fault and why president obama missed two important summits, someone else is taking advantage and iran versus israel. is there a war in their genes?

in trying to explain how washington got into the mess it is in, pundits and politicians have focused on ideology. they point out the country has become more polarized as have the political parties in particular the republican party. the diagnosis is accurate but there's another distinctive cause of the current crisis which might have even more long lasting effects. the collapse of authority especially within the republican party, which might mean that these new tactics of threats, crises and deadlock are the new normal. the face of the republicans look like it did in '95 and '96 when the party stood its ground and shut down the government. that movement was led by the speaker of the house, newt gingrich, who directed it from start to finish.

john boehner by contrast acknowledged that his understanding of leadership is to sort of manage whatever his people want to do as cbs's bob schieffer put it. gingrich had the power to speak for his side. boehner, by contrast, is worried that were he to make a deal, he would lose his job and he's right to be worried. tea party members routinely explain that they lie awake worrying that boehner will compromise and cut a deal on obama care, the budget or immigration. the tea party is quite unlike gingrich's contract with america movement from the 1990s. grassroots movement made up by people who have a deep, deep dissatisfaction with where the united states has gone over the past several decades, cultur culturally, socially and economically and crucially for this degeneration they blame both parties. in a recent gallop survey, an

astounding 43% of tea party activists had an unfavorable view of the republican party with only 55% of them having a favorable view. they see themselves as insurgents within the republican party and not loyal members of it. the breakdown of any party discipline coupled with the rise of an extreme ideology are the twin forces propelling the current crisis. the republican party used to be a party that valued hierarchy. the democrats were a loose coalition of assorted interest with little party discipline and democrats nominated outsiders for presidents. mcgovern, clinton, obama. the republicans nominated the guy who had waited for his turn. today the republicans are dominated by the tea party which has no organized structure, no platform, no hierarchy and no

leader. this story began of course in the 1970s as political primariis pro li proliferated. more recent technological and organizational changes have accelerated the shift making it easier for outsiders to fund raise, get access to free media, establish direct connections with voters. at some point the republicans might move to the center. ideological shifts come and go. the decay of hour is moving in one direction and it will continue to transform politics. the american political system is designed with many opportunities for gridlock and paralysis any way and these are only going to multiply. at the end of the day without the capacity for leadership, government becomes difficult and

self-government becomes close to impossible. a legendary political scientist said no america without democra democracy, no democracy without politics and no politics without parties and no parties without compromise and moderation. let's hope he was right about that last bit. for more on this, go to cnn.co / fareed. let's get started. you heard my take and lets get to my panel who have studied the subject deeply. norman ornstein is author of "its even worse than it looks. how the american constitutional system collide d with new

politics of extremism" and jeffrey toobin is with us and vanessa williamson is a ph.d. candidate at harvard university and co-author of "the tea party and remaking of republican conservati conservatism." a fine piece of work. one thing i want to you explain to us, there are people who say, look, using the debt ceiling or even the shutdown as a threat to get what you want, this is part of what congress has done for the last 20 or 25 years. you actually wrote very teeloq t eloquently saying it really isn't. why? >> we have seen the political system used as a game for a very long time. you can see the scripts when your party has the presidency, members will get up and say we've got to be disciplined.

we have to be careful about the full faith and credit of the united states and the other party says we're going to stand firm to make sure that our debt stays under control and then they'll switch the scripts. barack obama played that game when he was a senator. everybody knew it was a game. they were never really going to threaten the full faith and credit of the united states. back when democrats had a majority in the house of representatives and ronald reagan was president, we say the debt limit used as a lever over disputes over spending but again everybody knew that there were votes in reserve just in case. now using the debt limit as a real threat, i will send the country over the cliff unless my demands are met. as a hostage for extortion purposes, that is simply unprecedented. it started in 2011. it's escalated now. it's unacceptable. >> and a lot of times what those negotiations would take the debt limit and tack it on an ongoing

budget negotiation. there were times when something was being negotiated. let's do it all together. >> it was folded together with a negotiation over spending which was directly related but one time you saw a deal that didn't directly involve that was when tip o'neil said to ronald reagan, my democrats will vote for your increase in the debt limit if you write them each a personal letter thanking them for doing it so it can't be used against anymore in an attack in the next election. that's different than what we see now. >> at the heart of this, jeff, you think is redistricting. explain why. >> ever since the 1980 census, both parties have decided that they are going to preserve their districts and computer technology, software, has allowed them to craft districts that are overwhelmingly democrat or overwhelmingly republican. that means the incumbents in congress fear primaries from their own party more than they

fear the option party which means ideological purity is a greater value, political value, for many congressman than bipartisanship and that especially on the republican side has led to a very substantial caucus who simply are more extreme even than the republican party now which is a lot more conservative than it used to be. >> that means the flip side of that is 60 members of the house of representatives who have really been at the heart of this whole thing. they find that in their districts, which are overwhelmingly republican, overwhelmingly white, they are very popular for having threatened -- for having attacked president obama. >> there is as far as i know no republican member of congress who has paid a political price for being too extreme. there have been plenty of moderates in the senate and in the house who have lost their seats because of this or at

least suffered serious challenge. no one has suffered by being too extreme and politicians respond to those sort of incentives. >> vanessa, why is this happening in the senate which is not subject to redistricting and why is it happening in the whole political system, the move to the extreme particularly on the right? >> i'm glad that you raised that. it's definitely the case that while at times of redistricting we see increases in the sort of safety of seats for whoever gets the opportunity to choose their districts, but the pattern has been happening for decades not just on the census but over all the years and important aspect to think about that is sorting of the american people. not that we're counting people in different categories, but the ideological difference between people has grown and they've sorted themselves into neighborhoods that are more economically similar, more socially similar and that results in far less need to compromise. >> norm, you have said that all

of this is true and there's a bipartisan aspect to it happening on each side but that the republican party you called them an insurgent outsider and you said it's really the republicans who are to blame more in this politics of extremism. >> and of course we've seen the parties polarize but the fact is democratic party moved a little bit to the left. republican party has moved dramatically to the right. we have lots of evidence for that. it's not just what i say. when you have jeb bush say during the last campaign that ronald reagan couldn't win a nomination in his own party now, it tells you something. but it's not just polarization. it's become tribal. some of this goes back to newt gingrich and the strategy that he used to win a republican majority in the house in 1994. some of it is the new tribal media. but the fact is you have a party now with a dramatic increase in the number of people who are not conservatives. they are radicals. they don't believe in a smaller, leaner, meaner government where the parts that you need to have work efficiently.

they want to blow the whole thing up. they don't believe in institutions and the fact is they're now the dominant forces in the party and you don't see the same thing on the left. >> institution of the moderate republican in the united states senate. there were a dozen of them in the 1970s. maybe there's one now, susan collins. on the supreme court moderate republicans dominated for decades. all done. >> we need to take a break. we have heard the problem. what is the solution when we come back. [ female announcer ] research suggests cell health

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>> we are back with norman orrin stooin, jeff toobin and vanessa williamson. if redistricting is at the heart or one of the key drivers here, what's the prospect that this is going to stop ? there are a few states that have tried to develop real congressional districts but you are asking the very people who have done it to undo it. >> in that article you mentioned, it was written as a preview for a supreme court case that challenged the institution of partisan redistricting and that challenge lost. it's open season. redistricting will continue. as to what can be done, parties have to learn their lessons. i think losing presidential election is what makes parties

change. bill clinton took the democratic party toward the center. tony blair took the labor party toward the center in britain. they did it because their party kept losing. maybe there's a republican out there that will lead the republican party toward the center. >> vanessa, your book is about the tea party and remaking of the republican conservatism. what are these people likely to learn? what i'm struck by is they are so deeply dissatisfied with the last 40 years, maybe longer. they really want to undo stuff that happened in the 1960s and beyond. that's 50 years of american history whether you call it progress or not. it's unlikely to happen. >> i think that's a real important point. when i was traveling the country interviewing tea party members, i was struck by a couple things. remarkable level of citizenship. these people are engaged in grassroots level. they go to local committee meetings that no one goes to. they run for school board. they do all of these things that

are frankly very admirable but they don't in vision of democracy have much of a sense of compromise. it wasn't a part of what they had in mind that at some point there would be a reasonable opposition with whom they would have to negotiate and that attitude has risen up through the highest ranks of the republican party at this point. the concerns you're seeing among older conservatives, which have frankly been there for a long time about the country changing and changing demographically and young people not entering the workforce the way they used to, those concerns are there for a long time. there are connections between very elite elements in washington that want to roll back popular programs like medicare and grassroots conservatives who used to be organized through churches so now a member of congress are in a pincer position. stuck between large funders at the top pushing them rightward and grassroots primary voters also pushing them in that same no compromise direction.

>> and then there's the issue of the narrow casted media where you can find a way to amplify your voice and think tank process. i want to ask you a personal question. you work at the american enterprise institute which is conservative. you have in my opinion always been a straight shooter, nonpartisan, yet you have said republicans really bear more of the brunt. are you going to pay a price for this? >> i haven't paid a price. it's a very open place and they leave me to do whatever i want to do even though i cause heartburn for a lot of people. when we took this position, it wasn't nearlily as palpable and clear as it is now, we got pushed back more from mainstream press which hates the idea of not saying they're all to blame, it's everybody's fault. a lot of republicans inside congress were not happy because this was the message they did not want to have. so many former members of congress, republicans and

business leaders said you're right. we're losing our party. and that i think is happening. you know, the narrow casting of the media as we talk about what we might do about this, i'm really worried that we're tribalizing in so many ways what started as an elite level is now moving to the public. if you get people who hear things they want to hear and come to believe things that aren't true, it's amplified by social media, all of us get e-mails from friends and relatives with lead can you believe this which is a clear picture everybody out there if you get that, don't believe it. it's not true. once you come to believe it, you really do. what we're seeing with a lot of people that vanessa has talked to is they're not really republicans. they don't particularly like their own party or the leaders. they think that mitt romney lost because he wasn't conservative enough. i'm afraid losing elections now for many of them, it may take more than what we usually think. three presidential elections in a row you say we'll come back to the middle. that's what democrats did with

bill clinton. i'm afraid this will go on for longer and there's no easy structural solution to it. >> i think that's exactly right. just talking about some of the people i interviewed. people were doing three, four, six hours of fox news watching a day. so i mean they are getting one narrow picture of what the country is like. >> if only they watched three hours of my program. >> we would all be better off. >> don't make it sound like a totally bad thing. >> extensive television news watching. >> thanks for joining us. lots more ahead including a conversation with lloyd blankfein. obama missed two big asian summits last week and someone else has been taking advantage. i'll tell you who. jackie: there are plenty of things i prefer to do on my own. but when it comes to investing, i just think it's better to work with someone. someone you feel you can really partner with.

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now for a what in the world segment. here's the traditional funny shirts class photo from apec. the presidents of china, mexico, russia and others were there on

the far right tucked away, you see john mccain. where is president obama? >> good afternoon, everybody. >> he was stuck in washington of course dealing with the government shutdown and threats of default. obama missed not only apec but also the association of southeast asian nation summit as well as planned visits to malaysia and the philippines. for asians the symbolism was clear. the united states was struggling to get its house in order. and perhaps to highlight the contrast, china was president in full force putting on an exhibition of power and diplomacy. the president attended the apec meeting and then made special trips to malaysia and indonesia. the premier traveled to thailand. consider the deals struck last week. the president promised to triple his country's trade to malaysia

within four years. in indonesia, he promised tens of billions of dollars in investment and he courted australia's new prime minister tony abbott, to whom he promised more trade and more cooperation and technology and energy. it's not just trade, a new report from the nonprofit rand corporation outlines the dramatic escalation of china's foreign aid. in 2001, beijing spent 1.78 billion on foreign aid. in 2010, the figure rose to 169 billion. by 2011, it reached $189 billion. about 3% of china's gdp and it's still going up. the money trail points to a country flush with cash looking to snap up resources and opportunities around the world. what has been less clear in the last two years is the effectiveness of beijing's

foreign policy. as the chinese scholar points out, not a single member of china's seven member standing committee, the pinnacle of power in beijing is a foreign policy expert. the country's foreign minister doesn't make it into beijing's bureau and china made several missteps in the past three years. it escalated territorial disputes and was scene as a bully flexing its muscles with its neighbors. these signals mostly rhetoric were a contradiction not only of china's stated policy of a peaceful rise but also of its actual track record. china has not actually been involved in a single war since 1979 when it had a skirmish with vietnam. the moves worried its neighbors enough that they publicly asked for greater american involvement in asia. this past week china's leaders were at pains to display a softer face. they described china as a gentle

giant and not an aggressor. meanwhile, they put the focus back on the economy and building business ties with their asian neighbors. as ree pit was put last week, w should make the pie bigger and share this pie with our people. it's a smart win-win move. china's neighbors may worry about a big powerful giant but they want to trade with it. president obama's pivot to asia has been one of his wisest foreign policy moves well cons received and well executed. but it has been weakened. one more consequence of the vicious partisanship in washington. so you see a china that learns from its mistakes, smartens up and moves ahead. washington on the other hand keeps returning to deadlock, repeats its most stupid moves and continues to govern from crisis to crisis. it is a sad contrast that asia and the world can see. up next, a conversation with the ceo of goldman sachs it lloyd

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nthat's why they deserve... aer anbrake dance. get 50% off new brake pads and shoes. >> i'm candy crowley with a check of the headlines. the house is in recess today leaving the debt ceiling and government shutdown still

unresolved. senate leaders mitch mcconnell and harry reid are expected to have another meeting today. senator collins said they believes there will be a resolution to the shutdown this week. right now, thousands of people amongst them sarah palin and senator ted cruz are descending on the world war ii memorial in washington to protest its closure during the partial government shutdown. >> you look around and you see these barricades and you have to ask yourself is this any way that a commander in chief would show his respect, his gratitude, to our military? this is a matter of shutdown priorities. >> senator cruz said president obama is using veterans as political pawns in the shutdown. a tropical cyclone made

landfall on the coast of india but evacuations of a million people ahead of the storm limited the number of casualties. at least 13 people were killed in the storm. the strongest in the last 14 years. in 1999, another cyclone made landfall in the same place. it killed 10,000 people. those are your headlines. "reliable sources" is at the top of the hour. now back to fareed zakaria at "gps." the government shutdown and default debate have caused everybody stress from retired teacher with a pension to america's biggest corporations all worried all more cautious with spending and investment. that's a tragedy of the past two weeks. before then, the american economy was showing signs of revival. that's what i talked to lloyd blankfein about when i sat down with him recently at the clinton

global initiatives meeting here in new york. listen it. lloyd, when you look at the u.s. political system, it seems deadlocked, paralyzed, use whatever phrase one wants. the american economy seems to be coming back in a broad way. >> because it's pretty resilient. listen, the american economy, you're right, it's doing well and there's a lot of tail winds, energy, you can tick through the amount of tail winds that are happening. ultimately, it's the culture of the united states. we all had the same dealing with the consequences of the credit bubble. with the united states, we recapitalize the bank. nobody likes -- by the way, the aftermath was also hard. it got done.

restructu restructured. accepted a higher unemployment rate. didn't make people keep the same employment as often happens in europe when you have that different balance between social interests and economic interests. did all of that painful stuff and now it's as noisy as can be. in other jurisdictions, you had all of the noise and confrontation but you didn't get anything done. and all of that remains forward so the united states is in a position where banks are recapitalized, companies are efficient and not because they protected employment sadly because they accepted higher rates of unemployment. that's a social decision that gets made. not unreasonable to make a different one. but now that those companies are stronger and they're in a position to grow, to hire people back and run businesses on a sustainable basis, very liquid. lot of cash. and i think well positioned for the recovery. and by the way, what growth we

have now is not that qe represents the first step to normalization where we're tense and nervous whether the economy can absorb it, we have taken a substantial number of steps toward normalization. the biggest subsidy an economy had was the fact we were spending so much money than we were taking in in taxes. we closed up a substantial amount of that budget gap. sequestration. payroll taxes. higher taxes on others. one step toward normalization was for the ten-year interest rate to go from 1.5% to almost 3%. those are all steps toward normalization. the removal and tapering off of qe will another step. it's not the first step. >> you don't fear it? you're not one of the people that says once the fed starts withdrawing these extraordinary measures, the whole system is going to collapse? >> it joins a long parade of things over which i'm anxious. that's an element. but the point is that it's not

the first step and can the economy, whatever growth we're seeing now, is already in the face of the headwinds of a convergence of our spending and our revenue and maybe not to the same place that some people would want it but maybe two-thirds there. >> two-thirds of the way to the target. >> and so all of the growth we see this year is in the face of that. in other words, we have already absorbed some of the consequences of normalization. the tapering of qe is not the first step. >> lloyd, let me ask you this. is it fair to make this, you know, kind of moral equivalence if you will? both parties are moving in partisan directions. but only one party is threatening to blow up the united states' credit rating. >> you know, that's right at the moment.

you can find fault -- in the substance of it it you could say also part of the problem was this is not -- we don't have a parliamentary system. we have a system where the moderates of both parties are supposed to unite together and have a moderate solution which may or may not be the right result. it certainly brings about the most stable result because when the party in power shifts, the next party already signed onto and made its contribution owns it. for one moment in time in my life, we had a parliamentary system in effect where you had both houses had veto proof majority and the president of one party was effectively a parliamentary system and it passed legislation without having to compromise and consequently it didn't. that created a very unstable situation. the reaction to that i think is a terrible reaction. you can go back to a first cause and say if some of these elements and some of of the

legislation that had gone on -- >> if obama care had been passed with more republican support. >> more republican support and maybe the minor, maybe modest concessions that would have had to make to earn that support, it would have been a much more stable outcome. again, some people -- does democracy produce the best results? in a way it produces the most stable results and the most stable tends to be the best results. now we have a situation where we have obama care. and the republicans want to destroy it. and the democrats want to -- eventually you're going to have a change of government. it's not a good situation. i could find -- i can see the world through the lens of either side. right now my focus is really on what the republicans are doing, which i don't consider to be the best constructive civic behavior because if they don't like the resolution, but it is resolved. to go about and say i'm going to blow up the budget or i'm going to blow up the credit.

i'm not going to pay for debts that i had already taken on. i don't think that's right. if you go a step back and see underlying cause for their frustration, that wasn't right either. >> up next, more of my conversation with lloyd blankfein including how he intends to mark the second anniversary of the occupy wall street movement. >> i must send flowers. [ female announcer ] research suggests cell health plays a key role throughout our lives. one a day women's 50+ is a complete multivitamin

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>> more of my conversation with lloyd blankfein, the ceo of goldman sachs. i was moderating a panel discussion at the clinton global initiative along with blankfein was jim rogers, who is retiring after 25 years as the ceo of duke energy, one of america's biggest energy providers and dennis o'brien. one piece of the american recovery is the energy story. tell us from your perspective how big is that story? of shale, of natural gas, of oil, all of these things. i think everyone was expecting a

technological revolution in energy and they all expected it to be wind and solar and there was a technological revolution in energy but in extraction of hydrocarbons, correct? >> correct. shell gas is probably the most transformative innovation that occurred in this country in over a decade. as lloyd said, it's been a ta tailwind to the economy but in terms of achieving environmental goals, we're in 1993, 1992 level of co2 emissions in this country but we have significantly more people and a much larger economy. so i think that it's been transformative both in driving our economy but transforming in meeting our environmental objectives as far as climate change is concerned. >> that was jim rogers, chairman

of duke energy. i asked my panelists about income inequality. a hot topic not only in america but around the world these days. how did we get so unequal and what responsibility to corporations have to fix the problem? listen in. >> this is now a kind of anniversary of the occupy movement. there's inequality and protests around inequality in many countries from brazil to turkey. >> america. >> right. so let me ask you, looking back with occupy wall street having its anniversary, what do you think it all means? >> i must have missed it. i don't know why this is such a big anniversary. i must send flowers. look, i think there was -- i think in the world today and partly as a result of rapid change in technology, there

are -- there's a bit of a winner take all aspect in some of these aspec aspects. if someone makes a good product, they want a great product. there's no doubt that the flak world has had some adverse consequences in addition to the great consequences. all of these open markets are making the manufacturing of every tv in the world is going to take place in taiwan and it's not going to take place here and countries have to compete and win and if a country comes in secondly, they may not get anything in a certain product line. that's making for winners who win a lot and a lot of people who aren't able to keep up competitively and it's a very bad situation. and it's not just made better by income redistribution because people don't want to just be sustained, kids getting out of school need jobs in order to have jobs they have to be surrounded by people -- they have to be in context in which

things are made that other people want to buy. and that's not true in every place around the world and it became less true in the united states over the last generation. income redistribution is part of a fix of part of a problem but the real thing in the united states and other countries who want to be successful is you have to be competitive and you have to make things that people want and you have to make them at a rate where you can price them so that you beat out other competitors. >> how do you look at the issue of income and equality. even ireland -- i know there's been huge discussion about it because you've had a lot of growth but you've had a huge expansion of income an equality. >> i think certainly you have to take heavy doses of cod liver oil. it's been really tough for three or four years. we've seen real wages drop in many cases by 20%. so we just as a country got

ahead of ourselves and now we're kind of an emerging economy again along with spain probably even portugal. and just coming back to what lloyd was talking about there and you mentioned obviously the occupy wall street, i would be on the left of that because i think we should be listening to some of the things that these people are saying. i would actually have a sneaking regard for some of the things they say. and if you look at cgi, it's a perfect antidote to that because major corporates whether they are in the u.s. or europe or all around the world, multinationals, need to do more in their communities and goldman sachs has done fantastic community initiatives in the u.s. but more and more we need to move away from this statement in our annual reports to actually doing something impactful. i think particularly in africa, particularly in all of the emerging markets, companies that go and invest in those countries

really have to do something meaningful to actually change that country. and i think this is all about doing that. people standing up and making a promise to do something and more and more those kind of things that activity will be the antidote to the occupy wall street movement. >> did you learn anything from the occupy wall street movement? >> there was a lot going on and lessons being given at the same time. it's hard to separate them out. of course i did. i would like to say something and respond. the biggest contribution that we make and in fact as i look at my fellow panelists that they make is not going to be there but in our businesses. what i want to say to wall street businesses and others is that business has helped lift people out of poverty and fin an

tlopy should fill in the gaps. if hi to say which is made the best whether philanthropy or others doing what core businesses are, i would take the latter. >> that was lloyd blankfein of goldman sachs along with dennis o'brien and jim rogers. up next, there are a number of things that iranians may disagree with israelis on but what got iranians mad was a comment about clothing. right back. cer ] at northrop grumman, we know in the cyber world, threats are always evolving. at first, we were protecting networks. then, we were protecting the transfer of data. and today it's evolved to infrastructure... ♪ ...finance... and military missions. we're constantly innovating to advance the front line in the cyber battle, wherever it takes us. that's the value of performance. northrop grumman.

on tuesday, u.s. federal reserve began circulating new $100 bills for the first time in more than a decade. it brings me to my question of the week. what country is known to be the world's top producer of counterfeit dollar bills? is it peru, china, mexico or the united states? stay tuned and we'll tell you the correct answer. go to cnn.com/fareed for much more. you can go to itunes.com/fareed

if you ever miss a show or special. this week's book of the week is norm ornstein's "it's even worse than it looks." if you want to understand what's happening in washington, you really have to read this book by two impartial scholars that dissects how we got here and where we are likely to go. now for the last look. it's no surprise that israel's prime minister benjamin netanyahu offended some iranians with what he said at the united nations. the comment wasn't what sparked an anti-netanyahu twitter campaign in iran last week although it was a clothing related faux pas. >> i think if the iranian people have their way they would be wearing blue jeans and they would have western music and free elections. >> perhaps he missed this one. he could have helped him out here. iranians do wear jeans. they've done so for years.

we've seen people in denim when we were in tehran two years ago like this man and that man and this woman and that woman. it goes on and on. as i said at the time, tehran is a bustling city but iranians took to facebook and twitter and the message was clear. zip it, netanyahu, we wear jeans. they posted pictures of iranians doing just that. praying in jeans. the ayatollah reading to a child in jeans and photos like this mocking the red line speech. the answer is peru. most of the counterfeit circulating dollars in the u.s. come from peru.